Florida Man Charged in FCPA Broker-Dealer Probe

Wall Street Journal

A Florida-based managing partner of a broker-dealer was arrested Wednesday on charges relating to an alleged bribery scheme with Venezuelan banking officials.

Ernesto Lujan,who headed the Miami office of Direct Access Partners, was arrested in Wellington, Fla., and presented in federal court in West Palm Beach, Fla. He’s charged in a six-count criminal complaint with conspiracy, violating U.S. foreign bribery law, violating the Travel Act and money laundering, and was ordered held without bail.

Bruce Reinhart, Lujan’s lawyer, declined to comment.

Direct Access shut down, The Wall Street Journal reported, in the face of charges lodged in May by the Securities and Exchange Commission that it engaged in a “pay to play” scheme with Venezuelan officials in which traders at the firm bribed a top Venezuelan banking official to secure the bond-trading business of a state-owned bank the country. The allegedly scheme netted $66 million in fees, the SEC said.

“From his perch as managing partner, Ernesto Lujan…pocketed millions from the alleged scheme,” said Preet Bharara, U.S. Attorney for the Southern District of New York, in a statement.

Lujan allegedly arranged the illicit payments to a vice president at the state-development bank and routed some of them to intermediary corporations and offshore accounts she held in Switzerland, according to the complaint.

Four others, including the vice president of the Venezuelan development bank, were charged by the SEC in May for their roles in the alleged scheme. The lawyer for Tomas Alberto Clarke Bethancourt, a Miami-based executive vice president at Direct Access, declined to comment. Lawyers for Jose Alejandro Hurtado, a Miami resident, and Maria de los Angeles Gonzalez de Hernandez, the bank vice president, didn’t immediately respond to requests for comment.

Lujan and the others allegedly deceived Direct Access’ clearing brokers, executed internal wash trades, interpositioned another broker-dealer in the trades to conceal their role in the transactions and engaged in massive roundtrip trades to pad their revenue, the SEC said Wednesday.

“For a scheme this bold to succeed, it required the sneaky collaboration of several individuals including the head of the Miami office, said Andrew M. Calamari, director of the SEC’s New York office, in a statement.

Write to Samuel Rubenfeld at Samuel.Rubenfeld@dowjones.com. Follow him on Twitter at @srubenfeld.

For many financial services firms, work remains to operationalize the governance structures they have adopted. Further, expectations regarding governance have shifted: Stakeholders now see boards as more accountable for the effectiveness of their overall governance process. This shift is real, and it is significant. It will likely amount to an expectation of greater board involvement in the means by which governance is effected, and for more active oversight by the board and its committees.

Search for Risk & Compliance Report Articles

About Risk & Compliance

Risk & Compliance provides news and commentary to corporate executives and others who need to understand, monitor and control the many risks that can tarnish brands, distract management and harm investors. Its content spans governance, risk and compliance and includes analysis of the significance of laws and regulations, the risks inherent in global expansion and the protective moves taken by companies.